Correlation Between Fidelity Value and Fidelity Focused

Can any of the company-specific risk be diversified away by investing in both Fidelity Value and Fidelity Focused at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Fidelity Value and Fidelity Focused into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fidelity Value Discovery and Fidelity Focused Stock, you can compare the effects of market volatilities on Fidelity Value and Fidelity Focused and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Fidelity Value with a short position of Fidelity Focused. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fidelity Value and Fidelity Focused.

Diversification Opportunities for Fidelity Value and Fidelity Focused

0.76

Correlation Coefficient

Fidelity Value  Fidelity Focused

Poor diversification

The 3 months correlation between Fidelity and Fidelity is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity Value Discovery and Fidelity Focused Stock in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Focused Stock and Fidelity Value is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Fidelity Value Discovery are associated (or correlated) with Fidelity Focused. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Focused Stock has no effect on the direction of Fidelity Value i.e., Fidelity Value and Fidelity Focused go up and down completely randomly.

Pair Corralation between Fidelity Value and Fidelity Focused

Assuming the 90 days horizon Fidelity Value is expected to generate 4.41 times less return on investment than Fidelity Focused. But when comparing it to its historical volatility, Fidelity Value Discovery is 1.76 times less risky than Fidelity Focused. It trades about 0.04 of its potential returns per unit of risk. Fidelity Focused Stock is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,355  in Fidelity Focused Stock on September 19, 2024 and sell it today you would earn a total of  1,598  from holding Fidelity Focused Stock or generate 67.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Fidelity Value Discovery  vs.  Fidelity Focused Stock

Fidelity Value Discovery

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Value Discovery has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Value is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Fidelity Focused Stock

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fidelity Focused Stock has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong technical and fundamental indicators, Fidelity Focused is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Fidelity Value and Fidelity Focused

The main advantage of trading using opposite Fidelity Value and Fidelity Focused positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity Value position performs unexpectedly, Fidelity Focused can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Fidelity Focused will offset losses from the drop in Fidelity Focused's long position.

The idea behind Fidelity Value Discovery and Fidelity Focused Stock pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.